US tribal sovereign immunity: Allergan & Saint Regis

​In a keenly awaited decision the Patent Trial and Appeal Board ruled on the allowability of the Saint Regis Mohawk Tribe’s motion to dismiss a number of outstanding patent cases on behalf of Allergan.

Background

In our last issue we reported on Allergan’s attempt to use tribal sovereign immunity as a shield against proceedings at the Patent Trial and Appeal Board (PTAB) (see 'related article' right for a link to this earlier article).

Under US law, certain entities (including state governments and Native American tribes) have a form of “sovereign immunity” which exempts them from the jurisdiction of certain federal “administrative” proceedings.

One such example is the Inter Partes Review (IPR) in front of the PTAB.

In an attempt to take advantage of this immunity, Allergan signed an agreement with the Saint Regis Mohawk Tribe transferring six of Allergan’s US patents covering its product, Restasis, to the tribe with an exclusive licence of the patents back to Allergan. Upon completion of the agreement the Tribe filed a motion to dismiss a number of IPRs filed by competitors against the patents.

Judgment

On Friday 23 February 2018 the PTAB handed down its judgment on whether sovereign tribal immunity could be asserted in respect of the patents. The core of the PTAB’s analysis centred around which party was the “true owner of the challenged patents”.

The PTAB followed the nine factors set out in Azure Networks v CSR (2014) for determining true ownership. In its discussion the PTAB declared that the most important factor was who had the right to sue for patent infringement. This is in line with previous court decisions such as Apex Eyewear v Miracle Optics (2006), which found that ascertaining who has the right to sue is a key determinant in whether an agreement results in an effective transfer of true ownership. Under the terms of the agreement Allergan retained the exclusively right to sue for patent infringement which was accordingly viewed as a strong indication of true ownership.

Another factor that was considered in detail was who had the right to exploit the patent. Under the terms of the agreement Allergan retained the right to exploit the patents “for all FDA-approved uses in the United States”. As the patent claims were directed to pharmaceutical compositions and methods used to treat human medical conditions, the PTAB found that it was unclear what, if any, commercial activity could realistically be practiced by the Saint Regis Mohawk Tribe . Thus, Allergan’s exclusive rights were not limited in any meaningful sense.

In their judgment the PTAB produced a helpful summary table (see below) setting out on where it considered the indications of ownership to lie for all nine factors.

#

Attribute

Allergan

Tribe

1

Right to sue for infringement

Yes

No

2

Right to make, use, and sell products or services under the patents

Yes

De minimis

3

Right to sublicense

Yes

No

4

Reversionary rights in patents

Yes

No

5

Right to litigation or licensing proceeds

Yes

No

6

Duration of licensed rights

In perpetuity

Not applicable

7

Right to control prosecution and other PTO proceedings

Yes

No

8

Obligation to pay maintenance fees

Yes

No

9

Right to assign interest in patents

Yes

No

In summary the PTAB held that the terms of the licence-back between Allergan and the Saint Regis Mohawk Tribe transferred “all substantial rights” back to Allergan. Allergan is thus the “patent owner” for the purposes of continuing the IPR. As such, the Saint Regis Mohawk Tribe could not assert its sovereign immunity to dismiss the outstanding IPR challenges.

Conclusion

Given the value of the patents to both Allergan and the Saint Regis Mohawk Tribe it appears highly likely that the tribe will appeal the ruling. The judgment left a number of key questions unanswered. In particular, by finding Allergan to be the “true owner”, the PTAB did not definitively rule on whether tribal sovereign immunity could, in principle, be exercised in front of the PTAB. This leaves open the possibility that their may be some intermediate degree of “ownership” whereby a tribe has sufficient ownership to assert immunity, with the original patent owner retaining the majority of the rights in the patent.

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